Another economic illusion bites the dust

Joseph Stiglitz, winner of the Nobel prize for economics in 2001, and a former chief economist of the World Bank, says both developing and developed countries need to abandon inflation targeting or risk damaging their economies.

JOSEPH STIGLITZ: The countries that follow inflation targeting are likely to get themselves into trouble. Most countries today face imported inflation. To think that there is anything Australia can do to dampen global food inflation or global energy inflation is absolutely absurd.

EMMA ALBERICI: Do you accept the argument from our Treasury Secretary Ken Henry that inflation targeting of between two and three per cent has been a significant contributor to Australia’s economic prosperity?

JOSEPH STIGLITZ: No, I think that one of the major reasons for Australia’s economic prosperity are high commodity prices. Australia has been lucky about some of the things that it is exporting have gone up in price, and it would have taken a very bad mismanagement of the economy not to be doing very well under those circumstances.

And there was I thinking our highly successful World Class Finely-Tuned Ferrari Economy was down to the valiant efforts of John Howard and The World’s Second Best Treasurer, Peter Costello. Just goes to show that getting rich is not the same thing as good economic management.